India's banks have reinstated gold and silver imports, according to multiple trade and government sources. This move comes after imports were halted for over a month due to a customs requirement for banks to pay a 3% Integrated Goods and Services Tax (IGST). Banks have now agreed to pay the tax, allowing imports to restart. The resumption is expected to increase India's gold imports, widen the trade deficit, and exert additional pressure on the rupee. Banks have abandoned their wait for a government exemption order and have consented to pay the tax to clear shipments. A head of precious metals at a private bank in Mumbai stated, "We paid the 3% IGST at customs to clear gold and silver shipments. The banks waited for more than a month, hoping the government would issue an annual exemption order to waive the 3% levy. However, given the government's signals to curb gold imports, the banks gave up hope." When India implemented the IGST system in 2017, gold-importing banks were initially exempt from this 3% tax. However, since the start of the new financial year on April 1, customs began demanding IGST payments, prompting banks to suspend imports. A government official indicated that banks have recently started clearing gold and silver shipments. The official, who requested anonymity as they were not authorized to speak to the media, noted that trade sources also lacked authorization for public comment. The official added that after paying the IGST, banks have cleared approximately 9 tonnes of gold and 34 tonnes of silver so far in May. Chirag Thakkar, CEO of precious metals importer Amrapali Group Gujarat, commented that while bank imports have improved supply, demand remains weak, leading to gold trading at a discount. This week, Indian dealers offered discounts of up to $17 per ounce against the domestic official price, which already includes a 6% import duty and a 3% sales tax. Due to the import suspension after customs began levying the IGST, India's gold imports in April may have fallen to a near 30-year low of around 15 tonnes. In the context of the import halt, India's gold imports for April are estimated to have dropped to a near 30-year low of only about 15 tonnes. This starkly contrasts with India's traditional position as the world's second-largest gold buyer. Faced with increasing pressure on the balance of payments and the rupee exchange rate, Prime Minister Narendra Modi publicly urged citizens on Sunday to avoid buying gold for the next year to help conserve foreign exchange reserves. So far this year, the rupee has been one of the worst-performing currencies in Asia. Following the import resumption, a rebound in gold purchases could further widen the trade deficit, thereby creating new depreciation pressure on the rupee. From a global perspective, the revival of demand in India may provide support for international gold and silver prices. As the second-largest gold consumer after China, the normalization of India's imports helps local jewelers replenish inventories and hedge against recent price volatility pressures driven by geopolitical risks and a strong U.S. dollar. However, analysts also point out that domestic demand in India remains weak, with gold and silver still trading at discounts in the short term. A genuine rebound in demand may only materialize after inventories are depleted and the festive season approaches.